IRS Encourages Record Keeping Practices

With tax season right around the corner, the IRS has issued guidelines for effective record keeping. Copies of tax returns and supporting documents should be retained for at least three years, and employment tax records should be kept for at least four years. In special instances, such as when claiming a loss from securities, that time may be lengthened to a recommended seven years of record retention.

Care should be taken to make sure that documents are kept in a secure location, whether they are stored in hard copy or electronically. The IRS recommends keeping paper documents in a secure, locked location, and electronic files should be backed up and encrypted if possible.

When it comes to disposing of records after the recommended retention periods, it is important to remember that tax documents contain sensitive data such as Social Security numbers and bank account information and should be disposed of carefully. Paper documents should be shredded prior to disposal, and any computers, hard drives, or other media such as CD’s that contain sensitive documents should be not only deleted but also “wiped” using special software that fully removes sensitive data.